Buying American increasingly not in vogue

By Allan Drury
The Journal News
September 24, 2006

The U.S. auto industry has long wrapped itself in red, white and blue to appeal to American consumers.

Buy American cars, the message has been, and American auto workers will have job security, contributing to the economic well-being of the entire nation.

But years of producing inferior cars and getting out-maneuvered by more nimble Asian competitors like Toyota Motor Corp. and Honda Motor Co. Ltd. have eroded the collective image of The Big Three U.S. automakers and sunk them into a fight for their long-term survival.

The last two weeks have been particularly bad for Ford Motor Co., Chrysler Group and General Motors Corp.

Ford announced it would accelerate its downsizing and reduce costs by $5 billion by the end of 2008 by cutting 10,000 white-collar employees. The company, which does not expect to make a profit in North America for at least three years, is also offering buyouts to its 75,000 unionized workers. Two agencies further downgraded the company's debt ratings, which were already at junk levels.

DaimlerChrysler AG said it would cut its U.S. production by 135,00 more vehicles than previously planned the second half of this year in order to buy time to get rid of its fat inventory of trucks and sport utility vehicles.

General Motors Co., which is in the midst of a restructuring, said it will cut its North American production by 12 percent following disappointing sales reports.

In fairness, experts say the American makers have made impressive progress in the quality of the cars, trucks and sport utility vehicles they produce. And they've done this despite labor costs that are substantially higher than those of their foreign competitors.

But testing by experts like those at J.D. Power and Associates and Consumers Union consistently show Asian models to be a better value than American cars.

If Ford, GM and Chrysler want to regain the respect — and ultimately the customers they've lost — here's a not-so-radical suggestion from marketing experts: Make better cars and trucks that can compete with Asian models on reliability, durability and gas mileage.

Until they do that, Mike Paul, the president of MGP & Associates PR in Manhattan, doesn't have any advice as to how U.S. automakers can get back their prestige.

"If I were in the meeting at GM or Ford representing the public relations department and they asked me that question, I'd say: 'Guys, it's very simple. My job is to tell a truthful story over and over again, so that people understand that that's our branding. I can't tell a truthful story if we have an inferior car,' " Paul said. "As I've always said, spin doesn't work. The truth works."

Mark Stevens, the chief executive of MSCO Inc., a business marketing and consulting company in White Plains, compared trying to market the U.S.-made products as similar to trying to convince military leaders that building a Maginot line is a winning strategy. The Maginot line, named for a French defense minister, was a series of obstacles that Adolf Hitler's German forces were able to bypass during World War II.

"There's no marketing that would make the Maginot line something military planners would want to incorporate into their military systems," he said. "You can't market your way out of junk. You and I, everyone in the world, knows the best cars in the world are not made by those companies."

Some consumers agree.

Vivian Gonzalez of Harrison said she used to drive a Chrysler Jeep and "everything broke." Some of the items were mere nuisances, like seat belts, and others were large and expensive, like the engine, she said.

She now has a 2005 Honda Civic.

"They last forever," she said of Hondas and Toyotas. "All you need is an oil change."

Her friend, Melissa Bertoline of Peekskill, used to drive a Ford Explorer but now drives a Mazda Tribute, a sport utility vehicle. Mazda Motor Corp. is a Japanese maker that is 33 percent owned by Ford.

She said she got rid of the Explorer at about 90,000 miles because the transmission needed a major repair. At one point, the "check engine" light would stay on for no apparent reason, she said. It pains her to admit her conclusion, she said.

"I would like to say American cars are better because I think it's important to buy American, but I really think foreigns are better. The cars just seem to last longer."

But Joe Eustace of Brewster said he has had good luck with his 2004 Explorer and early 1990s Oldsmobile Cutlass Supreme. He also owns a Harley-Davidson motorcycle made by the Milwaukee company.

"See a pattern there?" he said, referring to his cars and motorcycle all being American.

"I'm happy with them," he said. "I'm an American. I live in America and I try to keep the money in America. I live in New York and I try to keep the money in New York."

The American makers think they've gotten a bad rap when it comes to quality. But they also admit they need to do better.

"There's a huge gap in perception and reality," said Sara Tatchio, a spokeswoman for Ford. "I'm not going to tell you we don't have a lot of work to do in quality, but we're making a lot of progress."

She pointed to rankings Ford's Fusion, a mid-sized car, has received as an example of the kind of progress the company has made and plans to make. The car received the highest score in its class in a J.D. Power and Associates report. The rankings were based on owner satisfaction with the design and performance of the cars.

Janine Fruehan, a spokeswoman for GM, said she believes that GM has performed well in J.D. Power studies, though she conceded U.S. automakers' cars tend to trail Asian vehicles in the rankings.

J.D. Power has ranked GM cars as among the best in their segments, she said. GM has also gotten kudos for the performance of some of its plants in producing vehicles with the fewest defects, she said.

The company's internal metrics show significant improvement the last five years. For instance, she said warranty repairs have dropped by 40 percent the last five years.

"That is huge and that speaks volumes about the level of quality that is being designed and engineered and built in GM products," Fruehan said.

Michael Aberlich, a Chrysler Group spokesman, said he believes that the immediate issue facing the U.S. makers is the need to make smaller, more fuel-efficient cars due to higher gasoline prices. The American makers have become heavily reliant on trucks, SUVs and minivans, he said.

"It's starting to really sink in to the American consumer that this high-priced gas is going to stay, that it may not be $3 but it's going to always be above $2," he said. "We're seeing a pretty big shift to smaller vehicles and we have to shift with them."

He said the issues of quality are "some perception, some reality."

But he said the surveys show the difference in the quality of the vehicles turned out by the various manufacturers is smaller than years ago because all the makers have improved immensely.

"In some particular areas, Chrysler Group is the benchmark," he said. "For a mid-sized car I can't imagine one that's more popular or that just about anyone would want in their stable than a Chrysler 300C. Everybody wants that."

The J.D. Power Associates 2006 initial quality study, which ranks cars based on the number of problems they have within 90 days, placed foreign nameplates Porsche, Lexus, Hyundai and Toyota in the top four sports. Jaguar, a British luxury carmaker owned by Ford, was fifth.

Honda, Cadillac, Infiniti — which is a Nissan brand — GMC and Acura, which is a Honda brand, rounded out the top 10. That means seven of the top 10 nameplates were foreign owned, and that's counting Jaguar as an American brand, since the parent company is Ford.

The J.D. Power study also ranked cars by segment. Lexus and Toyota models were ranked at the top of 11 of 19 segments. Kia, Porsche and Hyundai models were at the top of one segment each, meaning foreign models were at the top of 14 categories.

(Counting the Mazda MX 5 Miata as foreign would give foreign models 15 of the 19 top spots. That model was ranked the top compact sporty car.)

In another study conducted this year, J.D. Power measured the quality of 2003 model-year vehicles after three years of ownership. Models produced by American makers performed better in that study.

Lexus was first, with 136 problems per 100 vehicles, followed by Mercury, Buick and Cadillac. Five additional foreign brands were in the top 10 models. When J.D. Power broke the models into segments, foreign models were at the top of 12 of 19 segments. That again does not include a Mazda model that got top ranking.

Consumer Reports, the magazine published by Yonkers-based Consumers Union, predicted the Lexus would be the most reliable 2006 make among the 36 nameplates it ranked. Honda was second, followed by Toyota, Mitsubishi (which is also Japan based), Subaru (Japanese), Acura (a Honda brand) and Scion (a U.S. division of Toyota).

Suzuki placed 10th, giving foreign companies eight of the top 10 spots. Counting Mazda as foreign would make it nine of 10.

Fixing the problems is likely to be a lot more difficult than figuring out what caused them.

Stevens, who is known for advocating big-thinking, bold strategies, said if he became chairman of one of the U.S. makers, he'd start off his first day with a press conference at which he'd announce the company was suspending all advertising for six months because none of its cars are worth advertising.

He said he'd tell the press that he was going to take all the money the company planned to spend on advertising and put into research and development so that within six months the company could produce the best car in the world. He'd promise that if the car is not ranked by the automotive press as the best of its kind, he would resign.

"The product defines the image," he said.